Rewards and Incentives: Do They Really Work?

Rewards and incentive programs are a part of professional life for many. But, do they actually do what they're supposed to do – make us work more productively? Research has indicated that while these programs might make people work harder, they might not help anyone work smarter. Is performance really improved by incentive programs and rewards? Let's take a look at some of the most recent findings on the matter.

April 25, 2016

Rewards and incentive programs are a part of professional life for many. But, do they actually do what they’re supposed to do – make us work more productively? Research has indicated that while these programs might make people work harder, they might not help anyone work smarter. Is performance really improved by incentive programs and rewards? Let’s take a look at some of the most recent findings on the matter.

Do You Know What You're Worth?

Researchers from Erasmus University’s Rotterdam School of Management and the University of Ljubljana in Slovenia studied the impact of different types of pressure and distractions on the brain activity of 30 financial managers. Their results indicated that bonuses, and also social pressure, did cause folks to work a little harder. It’s important to keep in mind that effort counts for a lot.

“Organisations should take care that performance assessments accurately capture the efforts of workers, both to measure whether targets and incentives are effective and to ensure that individuals are rewarded fairly,” Professor Hartman, professor of management accounting and management control at the Rotterdam School of Management, told The Independent.

2. However, that only improves overall performance to a certain extent.

The researchers also concluded that while certain rewards did boost effort, that didn’t have as big of an impact on overall performance as some might think. The idea is that workers still bumped up against their own natural affinities and abilities for the work.

“Businesses need to recognise where performance limits may lie and avoid frustrating employees when results do not reflect best efforts,” Professor Hartman said.

Researchers recommend that companies focus on offering reward programs that have been proven to work and let go of other practices that do not. Workers should be rewarded for working harder, not just for better overall performance or greater success.

3. But, rewards are also about attracting and retaining top talent.

There is more to reward and incentive programs than first meets the eye. Companies use them as a means to achieve many different objectives. More than half of American companies utilize some kind of incentive program with their employees, and U.S. organizations spend more than $100 billion on them annually, according to Blackhawk Engagement Solutions.

Rewards work in a variety of ways, but the results depend on the specific type of program or policy being offered by employers. As employees, we should take note of the way our company’s programs impact us and our performance. It’s also important to know that these kinds of programs are quite common. If your organization isn’t offering much, it might be something to offer up for consideration.

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